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The Phoenix Ins. Co. v. Small

United States District Court, E.D. Pennsylvania

May 19, 2015

THE PHOENIX INSURANCE COMPANY, et al.
v.
LEONARD SMALL

MEMORANDUM

STEWART DALZELL, J.

I. Introduction

We consider here defendant and counter-claimant Leonard Small’s amended counterclaim for interpleader pursuant to Fed. R. C. P. 22(a)(2) and the federal interpleader statute, 28 U.S.C. § 1335.

On October 5, 2012, a fire started in the kitchen of Leonard Small’s condominium, damaging other units in the building. The affected neighbors and residents filed claims with their insurance companies, and, after those companies paid their insureds’ claims, they became legally and equitably subrogated -- to the extent of their payments -- to their insureds’ right to recovery.

After the filing of three separate lawsuits in this Court with respect to this incident --which we consolidated into this case -- and representations that other lawsuits were pending in the Montgomery County Court of Common Pleas or would soon be filed elsewhere, we ordered Small to file a counterclaim for interpleader. He did, and, on December 23, 2014, his insurance company, Liberty Mutual Fire Insurance Company, paid $300, 000.00 into the Registry of the Court as the interpleader res for equitable distribution. All but two of the insurance companies have responded to Small’s amended interpleader counterclaim.

As explained below, we (1) hold that the jurisdictional requirements for interpleader have been met, (2) enjoin pending and future proceedings in other courts pertaining to the interpleader res, (3) enter default judgment against the non-responding insurance companies, (4) dismiss Liberty Mutual Insurance from the case as a disinterested stakeholder, and (5) order the responding insurance companies to file motions for summary judgment to determine the equitable distribution of the interpleader res.

II. Standard of Review

Interpleader allows a party holding property -- called the “stakeholder” -- to join in a single suit two or more parties asserting mutually exclusive claims to that property. 28 U.S.C. § 1335; NYLife Distrib., Inc. v. Adherence Group, Inc., 72 F.3d 371, 373 n.1 (3d Cir. 1995). Actions in the nature of interpleader may be brought in the judicial district in which one or more of the claimants reside. 28 U.S.C. § 1397. Interpleader protects the stakeholder from the hazards of navigating competing claims and having multiple liability claims from several claimants while giving the ultimately prevailing party ready access to the disputed funds. NYLife Distrib., Inc., 72 F.3d at 374. Courts presiding over an action in the nature of interpleader may restrain claimants from prosecuting proceedings affecting the property involved in the interpleader action. 28 U.S.C. § 2361. The district court “shall hear and determine the case, and may discharge the plaintiff from further liability, make the injunction permanent, and make all appropriate orders to enforce its judgment.” Id.

Interpleader permits the Court to determine the claimants’ relative priorities, whether equitable principles require the Court to alter that priority, and ultimately to make an equitable distribution of the interpleader res. Domus, Inc. v. Davis-Giovinazzo Constr. Co., Inc., 2011 WL 3666485, *6-7 (E.D. Pa. Aug. 22, 2011) (O’Neill, J.). Actions under the federal interpleader statute tend to proceed in two stages. First, the Court determines whether the statute’s requirements have been met and whether the stakeholder may be relieved from liability. NYLife Distrib., Inc., 72 F.3d at 375. Second, the Court adjudicates the adverse claims to the interpleaded res. Id.

III. Factual Background

We recite the facts as they appear in Small’s amended interpleader counterclaim and the answering insurance companies’ responses thereto.

On October 5, 2012, a fire started in defendant and counter-claimant Small’s condominium damaging a number of the surrounding units in the building located at 1600 Church Road in Wyncote, Pennsylvania. Am. Interpleader Countercl. at ¶¶ 2, 4. At the time of the fire, Small had an insurance policy with Liberty Mutual Fire Insurance Company (“Liberty Mutual”), the other counter-claimant in this action. Id. at ¶¶ 2, 3, 50-51. Small’s policy --identified as Policy Number H62-281-332467-402 -- provided $300, 000.00 in liability coverage for claims arising from any single occurrence. Id. at ¶¶ 50-51. Liberty Mutual has deposited the proceeds of the insurance policy -- $300, 000.00 -- into the Registry of the Court as the res for this interpleader action.

As described below, Small’s neighbors filed claims with their insurance companies for fire-related property damage, and those companies paid their insureds’ claims. Many of those insurance companies then filed suit in federal or state court to recover proceeds, as their insureds’ subrogees, from Small’s insurance policy.

Plaintiff and counterclaim defendant Allstate Insurance Company (“Allstate”) -- an Illinois corporation -- insured eight residents’ properties and paid those claims for fire-related property damage. Id. at ¶¶ 6-7. Allstate filed a complaint as its insureds’ subrogee in this Court, captioned Allstate Insurance Company v. Small, C.A. No. 13-5806, which we consolidated into this related case. Id. at ¶ 8. Allstate’s total claim on the res is $154, 390.46. Allstate Answer at unnumbered page 9 (Affirmative Claim 2). Allstate demands that its equitable share of the res be considered only partial satisfaction of its claims and that it not be restricted from pursuing the balance of its recovery against Small. Id.

Plaintiff and counterclaim defendant Hartford Underwriters Insurance Company (“Hartford Underwriters”) -- a Connecticut corporation -- insured three residents’ properties and paid those claims for fire-related property damage. Am. Interpleader Countercl. at ¶¶ 9-10. Hartford Insurance Company of the Midwest (“Hartford Midwest”) -- an Indiana corporation with its principal place of business in Hartford, Connecticut -- insured two residents’ properties and paid those claims for fire-related property damage. Id. at ¶¶ 12-13. Hartford Underwriters and Hartford Midwest, as their insureds’ subrogees, filed suit in this Court, captioned Hartford Underwriters Insurance Company et al. v. Small, C.A. No. 14-5243, which we consolidated into this related case. Id. at ¶¶ 11, 14. Hartford Midwest's total claim on the res is $116, 789.66. Hartford Answer at page 8 (Affirmative Claim 5). Hartford Underwriters' total claim on the res is $27, 887.69. Id. (Affirmative Claim 6).

Plaintiffs and counterclaim defendants The Travelers Home and Marine Insurance Company, The Phoenix Insurance Company, The Automobile Insurance Company of Hartford, Connecticut, and Farmington Casualty Company (collectively “Travelers”) -- all Connecticut corporations -- insured nine residents’ properties in the building and paid those claims for fire-related property damage. Am. Interpleader Countercl. at ¶¶ 15-16. Travelers filed a complaint as subrogees of their insureds in this Court, captioned as this case, into which we consolidated the other related cases. Id. at ...


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